What are 'change in control events' defined as in the context of the 2022 Plan for Benjamin Franklin Plumbing?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
The awards issued under the 2022 Plan are also referred to as Class B Profit Interest Units. For the 2022 Plan, 26.67% of Class B Profit Interest Units vest over time and are conditioned upon the participant's continued employment and the achievement of a set return on invested capital. Remaining awards vest as the Company achieves multiples of the invested capital and are conditioned upon occurrence of a change in control or a qualified leverage recapitalization ("change in control events").
For the Class B Profit Interest Units granted under the 2022 Plan, for the years ended December 31, 2024, 2023 and 2022, the Company determined that it is not probable that any of the change in control events will occur and, as such, compensation expense related to the portion of the awards conditioned upon occurrence of these events has not been recognized in the consolidated financial statements for the years ended December 31, 2024, 2023 and 2022.
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to the 2025 FDD, the awards issued under the 2022 Plan for Benjamin Franklin Plumbing are referred to as Class B Profit Interest Units. A portion of these units, specifically 26.67%, vest over time, contingent on the participant's continued employment and the achievement of a set return on invested capital. The remaining awards vest as the company achieves multiples of the invested capital. These remaining awards are conditioned upon the occurrence of a "change in control" or a qualified leverage recapitalization, which are collectively referred to as "change in control events."
For prospective Benjamin Franklin Plumbing franchisees, this information is relevant if they are part of the management team or employees who are granted Class B Profit Interest Units under the 2022 Plan. The vesting of a significant portion of these units depends on events like a change in control or a qualified leverage recapitalization. If such events do not occur, these units will not vest, potentially affecting the franchisee's compensation or equity stake in the company.
The FDD indicates that for the years 2022, 2023, and 2024, Benjamin Franklin Plumbing determined that it was not probable that any of these "change in control events" would occur. Consequently, the company did not recognize compensation expenses related to the portion of awards conditioned upon the occurrence of these events in its consolidated financial statements for those years. This suggests that such events are considered relatively rare or unpredictable by the company.
It's important for potential franchisees to understand the conditions under which these Class B Profit Interest Units vest, as they represent a form of equity compensation. The fact that a portion of these units is tied to "change in control events" introduces an element of uncertainty, as the occurrence of such events is outside the direct control of the franchisee. Prospective franchisees should seek clarification from Benjamin Franklin Plumbing regarding the specific definition of "change in control" and "qualified leverage recapitalization" to fully understand the vesting conditions of these units.